How much to set aside for taxes when you're self-employed in Canada
Short answer: most self-employed Canadians should set aside roughly 25–30% of their net business income for income tax and CPP, and — separately — 100% of the HST/GST they collect, because that money was never theirs to begin with. But the right number depends on your income and province, so treat the percentage as a starting point, not gospel.
Why a single percentage is risky
A flat "save 30%" rule breaks down for two reasons:
- Canada's income tax is progressive. Your first dollars are taxed far less than your last. Someone netting $35,000 owes a much smaller percentage than someone netting $120,000. A flat rate either over-saves (locking up cash you need) or under-saves (a nasty April surprise).
- There are three different obligations, and they behave differently. Lumping them together is where people get caught.
The three things you're actually setting aside for
1. Income tax — federal + provincial
Progressive, and your provincial portion depends on where you live on December 31. Ontario, BC, Alberta, and Quebec all have different brackets.
2. CPP — the one that surprises people
As an employee, your employer pays half your CPP. When you're self-employed, you pay both halves — roughly double the rate on your net business income, up to an annual ceiling. It's mandatory, and forgetting it is the single most common reason a self-employed tax bill comes in higher than expected.
3. HST/GST you collected
If you're registered, the tax you add to invoices isn't income — you're holding it for the CRA. Set aside 100% of it, ideally the day each invoice is paid, and remit it on your filing schedule.
A practical set-aside routine. Every time a client pays you: move the HST/GST portion straight into a separate "tax" account — it's not yours. Move ~25–30% of the rest (your fee before HST) into the same or a second account for income tax + CPP. Live on what's left.
Don't forget your deductions
The percentage you set aside is on your net income — revenue minus legitimate business expenses. Software, home-office costs, a portion of your phone and internet, business-use vehicle mileage at the CRA per-kilometre rate, professional fees: all of these reduce what you owe. Track them as you go, not in a March panic.
Quarterly installments: when "save it" becomes "send it"
Once your tax owing crosses a threshold two years running, the CRA stops waiting until April and asks for quarterly installments. Miss those dates and interest starts accruing. The standard installment due dates fall in March, June, September, and December — but confirm your exact obligation on your CRA notices.
Get your real number, not a rule of thumb
A percentage gets you in the ballpark. To set aside the right amount, you need your actual marginal rate, your province's brackets, both halves of CPP, and your deductions — which is exactly what Saava does: a live year-end estimate on verified federal and provincial rates for every province, HST set-aside tracked per invoice, and CRA installment dates flagged before they hit.
Frequently asked questions
For many mid-income freelancers, 25–30% of net income covers income tax plus both halves of CPP — but higher earners need more, and it's on top of the HST/GST you set aside separately.
No — you set aside all of it. HST/GST you collect isn't income; you're holding it for the CRA and remitting it later.
Yes. Provincial income tax brackets differ, so two freelancers with identical income in different provinces owe different amounts.
This article is general information, not tax advice. Confirm your specific situation with a CRA-registered accountant.